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Apple's iPhone Is Growing in China

By Rick Munarriz - Feb 19, 2014 at 3:30PM

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Apple is gaining market share in China, and things can get even better in 2014.

The market wasn't impressed that Apple (AAPL 0.88%) sold only 51 million iPhones during the holiday quarter, but a lot of those shiny new devices made their way out to China. 

Industry tracker IDC is reporting that Apple's share of China's smartphone market has grown from 6% during the third quarter of 2013 to 7% during the final quarter. The growth isn't a surprise, given the late September arrival of the iPhone 5s and iPhone 5c. China had the entire quarter to drum up sales of the iconic smartphone, and that hasn't been the case in the past. The iPhone 5 wasn't introduced into the world's most populous nation until December in 2012, a couple of months after its stateside debut. 

Don't go assuming that China Mobile (CHL) played a part in the boost. China's leading carrier didn't start officially offering iPhones until last month. The impact of China Mobile joining China Telecom (CHA) and China Unicom (CHU) as iPhone backers won't be felt until we begin to weigh the results of the current quarter.

It took a lot longer than many expected to get the iPhone into all three of China's largest mobile service providers. China Telecom and China Unicom have been offering the iPhone for years, but China Mobile was the lone holdout until last month. With 771.9 million total accounts, and 205.9 million of them being 3G customers, China Mobile is the undisputed top dog. It will move the needle, even at a company as large as Apple.

The move comes at a great time. It's not just the growing sequential market share ahead of the China Mobile push in January. Smartphone sales, in general, are expected to cool in the country this year. IDC is now forecasting 420 million smartphone shipments in China this year. That's nearly 20% ahead of last year's tally, but it's a far cry from the 64% surge in shipments China experienced in 2013.

One can argue that Apple would've been in a better position if it had found a way into China Mobile sooner, when early adopters were choosing their platforms; but hardware limitations, and the carrier's stingy ways, kept that from happening until last month.

Investors need to be realistic The iPhone isn't going to overtake Android as China's mobile operating system of choice. The high price of unsubsidized iPhone 5s, and even iPhone 5c handsets, will limit the addressable market. However, after seeing iPhone sales worldwide climb just 7% during the holiday quarter, China Mobile's addition, and China's slowing yet still heady growth, will serve Apple well as it pursues growth in the world's most populous country.

Rick Munarriz has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Apple Inc. Stock Quote
Apple Inc.
AAPL
$174.55 (0.88%) $1.52
China Mobile Limited Stock Quote
China Mobile Limited
CHL
China Unicom (Hong Kong) Limited Stock Quote
China Unicom (Hong Kong) Limited
CHU
China Telecom Corporation Limited Stock Quote
China Telecom Corporation Limited
CHA

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